Markets are making what looks like a bottom, says Fundstrat's Tom Lee
Speakers
Tom Lee — Fundstrat
— Fundstrat co-founder
Summary
- Markets are exhibiting "bottoming" behavior by absorbing bad geopolitical headlines without making new lows.
- A "position reset" has occurred, suggesting significant upside opportunity once the dust settles.
- Key indicators for a confirmed bottom include a VIX spike/retrace and Gold selling off while stocks turn green.
- "Mag-7" Tech and Crypto are identified as market leaders, having likely completed 90% of their decline phase in March.
Trade Ideas
Host Leslie Picker notes these specific tickers are trading up/better despite geopolitical fears. Tom Lee responds, "March was the makings of a bottom... the Mag-7 and the Cryptos... are outperforming. And I think that's a sign of leadership." When high-beta growth stocks (AI/Tech) ignore macro fear and rise while the broad market is choppy, it indicates smart money is stepping in. These assets are leading the recovery, suggesting the "winter" for tech is over. Long exposure to these specific mega-cap tech names as the leaders of the next rally. Escalation in geopolitical conflict causing a broad liquidity crunch that drags down even high-quality tech.
Tom Lee
Managing Partner and Head of Research, Fundstrat
Tom Lee explicitly groups "Cryptos" with the "Mag-7," stating they were "90% through to their... winters or declines" back in March and are now outperforming. By grouping Crypto with Big Tech as a "leadership" asset class, Lee implies that digital assets have decoupled from pure fear trades and are now trading on recovery fundamentals. If the bottom is in, these high-volatility assets offer the most upside beta. Long Bitcoin (BTC) as a proxy for the crypto sector recovery. Regulatory crackdowns or a failure of the "risk-on" correlation to hold during geopolitical stress.
Tom Lee
Managing Partner and Head of Research, Fundstrat
"I don't think Washington wants high oil prices into the midterms... It's encouraging that oil is not surging into the close." Despite the Strait of Hormuz headlines, political incentives (US Midterms) will force intervention to cap oil prices. The lack of a price surge on bad news suggests the "fear premium" is already priced in or being actively suppressed. Avoid chasing Oil longs on headlines; upside is likely politically capped. Actual physical closure of the Strait of Hormuz would override political suppression and spike prices.
Tom Lee
Managing Partner and Head of Research, Fundstrat
Lee states a sign of a bottom is when "Gold continues to sell off. And then stocks actually turn green." Gold is currently acting as the fear gauge. For the equity bull case to materialize, capital must rotate *out* of safety (Gold) and *into* risk (Stocks). Watch Gold for a breakdown. If GLD falls while SPY rises, it confirms the "All Clear" signal to deploy cash into equities. If Gold rises alongside stocks, it implies an inflationary melt-up rather than a healthy recovery.
